A vehicle lease can be appealing since it often comes with lower monthly payments and can help you afford a higher-priced car. However, there are some significant differences between buying and leasing that you should carefully consider before determining which is best for you.
Buying provides ownership at the end of the term. Leasing does not.
When you buy, you'll own the vehicle at the end of the term. On the flip side, at the end of the lease, you'll be required to either turn the car back in or to pay the residual balance, which is part of the lease agreement, calculated by the vehicle's expected worth at the end of the lease, plus fees and interest. A lease could make sense if you know that you'll want a new vehicle every three years and don't mind always having car payments.
A lease provides less flexibility for changes.
If there's one thing that the events of the year 2020 taught us, it's that life can be unpredictable. A lease can make it more difficult to lower the monthly obligations for your vehicle if you need to in the future. When you buy, there is greater flexibility to pay off your car early or lowering your payments by refinancing.
A lease comes with mile restrictions.
Most leasing agreements have annual mileage limits of 10,000, 12,000, or 15,000 miles. If you exceed the mileage limits, you are charged an overage at the end of the lease, which is usually a certain amount per mile that you were over.
Leasing often requires a higher insurance premium.
Leasing a car usually requires a higher baseline coverage and insurance premium.
A lease often prohibits ridesharing.
If you want to use your vehicle for a side business like ridesharing through Uber or Lyft, a leased vehicle may not be right for you. Leasing contracts often restrict any kind of rideshare usage. And, even if your leasing contract does not prohibit ridesharing, using the car for this purpose could cause you to go over your annual mileage limit.
If you’re in the market for a vehicle and decide that buying is right for you, Mattel FCU's auto buying service can help you get pre-approved for a loan, find a great deal on a car, and even have it delivered to you.